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Copyright Claim Accrues when Ownership Dispute Becomes Explicit

The US Court of Appeals for the Seventh Circuit concluded that a company’s attempt to regain ownership of the copyright in marketing materials it had been hired to create was not timely under the Copyright Act or under California contract rules, and that a claim for copyright ownership only accrues when a dispute over ownership becomes “explicit.” Consumer Health Information Corp. v. Amylin Pharmaceuticals, Inc., Case No. 14-3231 (7th Cir., Apr. 15, 2016) (Sykes, J).

Consumer Health Information (CHI) created educational materials for Amylin Pharmaceuticals to help Amylin market a new diabetes drug. The agreement between the parties, dated 2006, assigned all rights to the copyright in the material to Amylin.

In 2013, CHI filed a lawsuit claiming copyright infringement based on Amylin’s use of the educational materials, arguing that CHI was the owner of the copyright in the materials and that Amylin was not authorized to use, copy or publish the materials. CHI claimed that it had not been paid for some of its work, that the agreement between the parties was procured in violation of the California State law economic duress doctrine, and that the statute of limitation does not apply to contract defenses. CHI further argued that the lawsuit was timely filed under the separate-accrual rule.

Amylin moved to dismiss the lawsuit, and the district court agreed, holding that CHI’s contract recession claim was barred by California’s four-year statute of limitation. The district court further held that the Copyright Act’s three-year statute of limitation was applicable to CHI’s copyright ownership claim. Because the claim accrued in March 2006 when the agreement was executed, the lawsuit was not timely filed under the Copyright Act either. CHI appealed.

Under the separate-accrual rule, each infringing use of copyrighted material triggers a new three-year limitations period. If the separate-accrual rule applied, CHI’s claims concerning allegedly infringing acts that occurred within the three years preceding its suit would be timely.

The Seventh Circuit affirmed the district court’s decision, holding that the separate-accrual rule that applies in the traditional copyright-infringement context does not apply if the suit concerns copyright ownership rather than infringement. “We’re persuaded by the unanimous line of cases from our sister circuits and now hold that when the gravamen of a copyright suit is a question of copyright ownership, the claim accrues when the ownership dispute becomes explicit—that is, when the claimant has notice that his claim of ownership is repudiated or contested.” CHI knew when it signed the agreement in 2006 that Amylin owned the copyright via express assignment. Therefore, CHI’s lawsuit to reclaim the copyright ownership was more than four years too late and barred by the statute of limitation.

The Seventh Circuit further explained that CHI misunderstood the legal rule and its own litigating position. “Amylin didn’t sue Consumer Health to enforce the contract. Consumer Health sued Amylin asking for rescission as a necessary predicate to a claim of copyright ownership and recovery of damages for infringement. In short, Consumer Health is asserting fraud and economic duress offensively, not defensively, and as such cannot avoid the statute of limitations.”

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